Prosecutors charged that Michael Brackett, the founder of an AI startup, had falsified his financials to make money from investors, deluding one into giving him $500,000 before he disappeared and resigned from the company. His startup later failed, and two years later he was arrested over allegations of two counts of fraud.Michael Brackett, founder of data analytics firm Centricity, has been indicted in Manhattan federal court for purportedly attempting to deceive investors by manipulating bank statements and revenue numbers to falsely make the company appear successful, prosecutors stated on Tuesday. In 2019, Brackett had raised $2.5 million from angel investors according to PitchBook data, in order to launch his firm which pledged to forecast consumer demand in real time. Brackett told The Wall Street Journal he would raise $10 million in 2021 however he resigned and Centricity failed.Prosecutors asserted that the fraud came to an end when Brackett did not manage to convince any new investors, leaving no funds available. Centricity had supposedly reported 13 large U.S. manufacturers and retailers as customers, prosecutors state. Documents showing $3.7 million in yearly revenue were supposedly presented to investors and short-term lenders.In actuality, prosecutors declared only two of those 13 firms were legitimate customers. Regardless, one victim firm wired $500,000 to Centricity unaware of the false information given by the CEO.The victim company soon discovered the fraud within days, prosecutors mentioned. Both the bank and Centricity were unable to return the funds, prosecutors claim. Brackett allegedly moved the funds from the account and the company collapsed shortly after.Brackett, a United States citizen and resident of Switzerland, has been charged with one count of securities fraud and one count of wire fraud. He was apprehended by federal officers in Maine, prosecutors revealed.Centricity's case is similar to the fraud allegedly committed by Charlie Javice, the founder of the troubled fintech Frank. Similarly to the assertions against Brackett, Javice allegedly manipulated her data to get JPMorgan to buy her startup. Similar to Brackett's unnamed victim, the bank only found out about the fraud after the transaction had been completed.Recently, SoftBank's Vision Fund filed a lawsuit against a startup that it accuses of scamming it out of $150 million using the same methods as Brackett and Javice.
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